Correlation Between Motorola Solutions and Littelfuse

Can any of the company-specific risk be diversified away by investing in both Motorola Solutions and Littelfuse at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Motorola Solutions and Littelfuse into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Motorola Solutions and Littelfuse, you can compare the effects of market volatilities on Motorola Solutions and Littelfuse and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Motorola Solutions with a short position of Littelfuse. Check out your portfolio center. Please also check ongoing floating volatility patterns of Motorola Solutions and Littelfuse.

Diversification Opportunities for Motorola Solutions and Littelfuse

-0.41

Correlation Coefficient

Motorola Solutions  Littelfuse

Very good diversification

The 3 months correlation between Motorola and Littelfuse is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Motorola Solutions and Littelfuse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Littelfuse and Motorola Solutions is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Motorola Solutions are associated (or correlated) with Littelfuse. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Littelfuse has no effect on the direction of Motorola Solutions i.e., Motorola Solutions and Littelfuse go up and down completely randomly.

Pair Corralation between Motorola Solutions and Littelfuse

Considering the 90-day investment horizon Motorola Solutions is expected to generate 0.76 times more return on investment than Littelfuse. However, Motorola Solutions is 1.31 times less risky than Littelfuse. It trades about 0.16 of its potential returns per unit of risk. Littelfuse is currently generating about -0.03 per unit of risk. If you would invest  43,939  in Motorola Solutions on September 3, 2024 and sell it today you would earn a total of  6,031  from holding Motorola Solutions or generate 13.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Motorola Solutions  vs.  Littelfuse

Motorola Solutions

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Motorola Solutions are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Motorola Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Littelfuse

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Littelfuse has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Littelfuse is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Motorola Solutions and Littelfuse

The main advantage of trading using opposite Motorola Solutions and Littelfuse positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Motorola Solutions position performs unexpectedly, Littelfuse can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Littelfuse will offset losses from the drop in Littelfuse's long position.

The idea behind Motorola Solutions and Littelfuse pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..